It's no Steal

After a brief drop, steel prices are rising again.

The U.S. steel industry had a good year in 2006, at least until the fourth quarter. Prices rose steadily through the spring and summer, then spiked in the fall. By November, it was a different story. Imports and inventories were up, and automotive and housing demand were down. Carbon and alloy steel prices fell 4% in the fourth quarter alone, and the price of rebar dropped $19 a ton.

Steel prices remained flat into early 2007, hitting a recent low in February. However, as excess inventories are depleted and domestic steel production picks up to meet new demand, manufacturers are once again finding steel to be very expensive. “There is a potential for a huge increase in the price of rebar,” says steel industry analyst Charles Bradford of Soleil-Bradford Research.

The price of steel scrap is a leading indicator of rebar costs, says Bradford. “The cost of shredded scrap, which is used to make rebar, has gone up 50% since the beginning of 2007,” he says. “I've been hearing numbers like $600 a ton.”

There are several factors for the jump. First, manufacturers that typically use lots of steel and produce excess scrap, such as the automotive industry, have cut back on their steel usage.

More significant is the amount of steel the United States is exporting, Bradford explains. Booming construction in areas like the Middle East has led to a surge in demand for steel rebar and scrap overseas. Factor in a decline in steel imports, and the result is clear: With less scrap available, rebar suppliers will demand higher prices.

These prices haven't necessarily reduced the amount of reinforced concrete construction. In fact, a record 10 million tons of reinforcing steel was used in 2006.

Competing materials

One factor in this success is the relatively higher cost of competing materials. “The price of structural steel is up, and it makes up 100% of a structure. Steel rebar is only a small percentage, typically about 2% to 4%, of reinforced concrete structures,” explains Bob Risser, president of the Concrete Reinforcing Steel Institute (CRSI). “On the paving side, asphalt follows the price of oil, which has gone up almost 27% over the past year.”

Rebar usage tracks very closely with portland cement, since it's the primary method of reinforcement in concrete. Both the CRSI and the Portland Cement Association predict a somewhat flatter market for 2007.

At the same time, alternative materials may be poised to gain a larger market share. “Any time there is an increase in conventional raw material prices, it provides impetus for people to investigate new design materials,” says John Carson, director of commercial development for TechFab, a manufacturer of carbon fiber reinforcement and founding member of the AltusGroup. “We got a tremendous amount of calls during the last steel price hike from companies who wanted to improve their product at a comparable cost.”

While the initial cost of composite structures like carbon fibers is typically higher than traditional reinforcement materials, and they don't replace rebar as primary reinforcement, they can offer long-term savings by eliminating labor. This allows for quicker manufacturing, and negates some problems of current materials.

As energy and material costs rise, Caron says producers will look for more cost-effective, innovative, and economical solutions, such as carbon fiber reinforcement.

Whether concrete producers and contractors are looking for ground-breaking solutions, or simply trying to get the job done with traditional materials, reinforced concrete construction continues to carry a hefty price tag.